With falling enrollments, most schools will be compelled to seriously reduce costs or go out of business. Lots of them have already failed that test.
It wasn’t so many years ago that higher education was a growth industry. Going to college was an expectation among most American students, and Obama pledged that the country would strive to have the world’s highest percentage of college-educated workers. How things have changed.
The college bubble — a consequence of easy government money and hyperbolic rhetoric — is now rapidly deflating. One of the economists who predicted that is Richard Vedder. In today’s Martin Center article, he writes about the coming crisis for colleges and universities, something for which most are ill-prepared.
He writes, “A massive financial crunch has hit many schools because of sagging tuition revenue growth (reflecting falling enrollment or more aggressive discounting of tuition fees) and reduced public financial support in the form of federal and/or state aid and stagnant private philanthropy, all occurring in an environment of heightened inflationary pressures increasing the dollars needed to operate.”
Vedder argues that the problems colleges have in dealing with this crunch stem from two sources — poor incentives for leaders and a poor ownership structure.
He continues, “Conversely, higher education works hard to avoid destruction while also avoiding needed moves designed to promote efficiency coming from increased outputs or lower costs, because its “owners” lack incentives to do so. When I chaired my department at my university, I tried to lower productivity by acquiring more staff to ease the work burden, and my colleagues applauded me for it. In profit-seeking private business, I would likely have been fired.”
With falling enrollments, most schools will be compelled to seriously reduce costs or go out of business. Lots of them have already failed that test.
What must college leaders do? Vedder closes with six suggestions:
One, adopt year-round schooling so students can get a bachelor’s degree in less than three years.
Two, abolish tenure for new faculty and incentivize some faculty to retire early.
Three, eliminate governmental support for colleges with more administrative staff than teaching faculty, forcing non-teaching staffing reductions.
Four, increase teaching loads, usually to at least three classes.
Five, end tax incentives to support ball-throwing contests (intercollegiate athletics), such as deductions for stadium luxury suites or indoor practice facilities.
Six, require minimal academic performance if federal financial assistance is to be granted to students.